BM1087

AIG's Blackmail Note

Maybe we should pat them on the back as they are led away in handcuffs!


On Mar 16 06:00 PM betweenthenumbers wrote:

> Great info, and a surprisingly easy and interesting read. It does
> read very much like a threatening legal letter, but with much more
> accessible prose (nothing new about having to talk down to politicians).
>
>
> One interesting note: one of the most stupid things AIG did was make
> bad bets backed by its AAA rating, with special provisions to allow
> the buyer of AIG derivatives to receive immediate payment/collateral
> were a ratings downgrade to occur (it was considered an "event of
> default"), though no actual losses need be booked. This set AIG up
> for the mother of all liquidity squeezes, because suddenly these
> special provisions became due on "1.6T in notional derivative exposure".
> AIG was essentially writing CDS *ON ITSELF*, meaning if AIG had any
> credit issues, then AIG is the counterparty that would have to pay
> you. Dead on arrival by any measure, yet AIG sung it to the tune
> of hundreds of billions in losses.
>
> People keep saying that the AIGFP division doesn't deserve their
> $175MM bonuses, but I disagree. This robbery is so complex and well-executed
> that the characters from Ocean's Eleven would be looking for pointers,
> and I think we (taxpayers of USA) should reward a job well done.